tv Bloomberg West Bloomberg September 18, 2014 6:00pm-7:01pm EDT
>> live from pier three in san francisco in new york, welcome to "bloomberg west." i'm emily chang. i had, he is one of the most legendary figures in a silicon valley, but larry ellison is takin -- stepping down from oracle. life inlook into what oracle without larry ellison as a ceo will be like. after months of anticipation, it is finally here. alibaba group praised its ipo at $68 a share.
that means they are raising it.8 billion, making the biggest ipo in american history. the apple ceo takes shots at companies like facebook and twitter. he says that apple does not scan your e-mails and believes in telling customers upfront what will happen to their personal information. first, the lead story of the day. billionaire larry ellison is stepping down as ceo of software giant oracle and will become a chairman and chief technology officer. he is the world's seventh richest person, and has been the only ceo in oracle history. the company in 1977, growing into a world leader in database software with a market cap of more than $185 billion.
twong over for him are trusted deputies who will become co-ceo's. they stress continuity. they deserve recognition, they deserve the ceo title, and i am happy that our management team continues forward as a team. >> oracle shares are trading down at after-hours. corey and is bill, san francisco, and the cofounder of a sun microsystems, which was sold to oracle years ago. thank you for joining us. scott, i have to start with you. what you make of this as someone who ran a company that larry ellison bought?> >> i think that he is right, there is not a lot of big change. he will not be doing much different. mark urges doing the same stuff hurd is doing the same
stuff. he has just abdicated the difficult fiduciary responsibilities of ceo to his two cohorts. i think he gets to do the fun stuff with less hassle. , but i do not him think the way the company will operate nor his contributions to the company will change much at all. >> and yet giving them the titles of co-ceo, do you think that will change how they work with each other? do you think that they can get along? co-ceo titles have not always work, especially at technology companies. >> i think it will work fine. i think they have had a chance to work together for a while now. i think they are both incredibly loyal to larry, and i think that larry still has the ability to step in and break any ties. as anly see it sort of announcement of larry shedding and af the less exciting
more fiduciary and governance aspects of his role in getting to do the fun stuff that he has enjoyed. cto is where his head is that. >> fun stuff like sailing. what you make of this news? >> i agree with scott, i do not think there will be much change. on salesbeen focused and marketing, and mary has been in the garage making cool product. there has been a clear division of labor for quite some time. i do think that the company is under a business transformation from license to subscription. i just got off the earnings call, and they are talking about it is a transition, so they are guiding below the stream in terms of revenue.
i do not expect much is going to change. they have great technology and i have that mark and safra been doing this for some time. i think this is more headlines and fundamental change. >> there you have it. is oracle in need of change? >> it is interesting. i think one of the interesting things that is not changing, i'm going to ask you, larry is giving the title of chief technology officer. he is turning over the title of ceo but keeping cto. larry'shat is involvement with technology, and is it curious that he is keeping that title in the job? -- and that job? >> it is not surprising to me, he spent most of his time doing that. you did not spend time with
analysts, with customers, running the operations. coo and markn the has been the chief sales officer. he has always been the chief technology officer. he was the only one that had the fiduciary responsibilities of filling out the forms and signing off on the stock report documents and all that other fiduciary stuff. i think he has light in his load on stuff that he does not really enjoy doing, and gift you spend more time on the stuff he does enjoy doing, which is driving product strategy, getting andlved with the engineers, hanging out more with features and functionality and quality. i think this is just merely moving around some signature authorities. way, given his position in the company as chairman, cto, and major shareholder, the
signature authority, in reality, will always go by him. ra and mark were comfortable with the past and they will become purple in the future. >> reactions from the head of cisco. larry is one of the top ceos of all time. safra and mark are a world-class team. i look forward to a continued world-class partnership with oracle. has such aon larger-than-life personality, he has made such great stories over the last several decades. what will oracle be like without that personality coming to the job every day? >> i think that you are speculating what might happen someday, because i do not believe, at least if i take at face value what larry is saying and what the company is projecting out there, he is going to spend just as much time
there as he has the last five years. since a little bit less he does not have to do all the fiduciary stuff, but i do not think his influence will be in -- will be any less. he will focus on the things that he is good at likes to do, and safra and mark can do the things he does not. i do not think it will be any different, i think they will continue to plug along. i think he has figured out cloud, recurring revenue through some scripture models. those are -- through subsc ription models. he is a smart guy and he understands how the industry works. i do not see any change. >> that me ask you about software and service. there is a lot of discussion about -- we had the deal announced right after the larry deal was announced, but we also
of revenues from the salesforce and workday, but those are smaller businesses in oracle. trueftware service a threat to oracle, or will it always be at the side? >> it is not a threat to the technology. toparry pointed out, the companies use oracle as their underlying plumbing. they run their core financials, their database, on oracle. i think what is hurting oracle is the business model perfect -- transitioning away from perpetual to subscription. it is not a technology transformation, it is a business model transformation. they will be in this for the neck to several quarters, if not years. it is a big transition. which talked a lot about this with microsoft. about this a lot with microsoft.
we think oracle will take a lot longer to get in, they were the last ones to admit this big transition. thisu point out today, will kick off another major mna wave in software. we think it has started but it will further accelerate. >> one last question, scott. i am serious as to what it is like to get with larry ellison when he is trying to buy your company. what was he like when you were doing the deal with them back in the day? >> well, we had an offer from ibm and the board was wondering if we could do better than that. i called larry, i actually , i was at a customer event and on the golf course. through one of the half-full's of conversation, with me ask
planning the situation in the challenge, he said, i got it, i understand, stay tuned, we will be back to you. within two weeks, we got a deal that the board considered in always better than the ibm deal, and it was done and over. there was none of this bigger than life thing, larry just understood what we were saying, went back, got his team organized, they put not for together, they put it on the table, and the deal was done. very efficient and very effective. use it very efficient and very effective businessman, very bright and capable and quite strategic. >> and knows how to get what he wants. larry ellison stepping down as ceo of oracle, staying on as chairman and cto. scott, cofounder of sun microsystems, which oracle bought. ali baba group conquered china and is now sitting on the largest ipo in u.s. history. we look at its global ambitions
>> i am emily chang, and this is "bloomberg west." atbaba is pricing its ipo $68. raising $28.8re billion, making it the largest ipo in u.s. history, and it could hit a global record if additional shares are sold. nearly market value of $168 billion, bigger than amazon. joining us now, reporter leslie, who has been following the story every day. in san francisco, cory johnson. stanford's charles lee joins
-- via skype. what you think of the price? >> it is close to what we expected. comparedsonably valued to some of the things that are trading there, like facebook. i think you would have a hard time seeing a hard time seeing his stay at that point after the market opens. expected, itat we could've been more, but it is a lucky number. >> eight is the lucky part of the number. now we are looking at nine/18. >> a lot of eights in their. >> it gives them that psychology, enough to demand a price at the high range of an increase. the whole point of doing
something like that is to give investors a good feeling, pricing at the high end of a boosted range. we want to be in on this hyped up deal. that is the reason rather than just racing at 68 to begin with. >> a lot of people are saying that it is too cheap, what do you think? \ are they leaving money on the table? i'm sure the deal is being price -- they're leaving something on the table so that there is something that creates demand and enthusiasm, so that it trades up in the aftermarket. that you wouldbe likely see a trade up. i am sure it will be a well-managed offering. the irony is that when stock straight down, independently of one they are priced, it looks like a stale offering. >> how do you expect tomorrow to go?
hookups, big problems, like we saw when facebook started trading? >> i hope so. as a journalist, that was more fun to cover than a smooth ipo. we know that have been running tests at the new york stock exchange. their listing their partly because of the problems with the dow and facebook. but this is a massive offering, and the price itself could raise some problems. if the investors look at this at -- this as a value, some of the people who plan to hold on might not want to hold onto them, might honor their fiduciary duty and get out when the getting out is good. i think that the size of the size of this deal really is going to make a big difference. it is going to change things, because there is so much stock huffled around here.
tohow does alibaba compared its peers, and who are its peers, as far as you're concerned? >> the question. peers, buts not have the closest competitors in china . over in the u.s., we are looking andompanies like facebook maybe amazon and ebay. ackage thatque p is coming together on this one name. >> they are saying that it is a bit amazon and a bit google some paypal thrown in. new investors know what they are buying? -- do investors know what they are buying? internet and big media and from a cynical conglomerate. it is difficult to value, which
charles lee, and jeff yang. when you look at alibaba, what you see as the biggest challenge going forward? >> certainly they have raised expectations, but i think that was a part of their strategy. they came out on the new york stock exchange, and i think they are trying to make a statement by doing that. they're trying to say that we are going to be one of the most valuable global brands and we are here to stay. and think you will see in the next few quarters that they will try to prove to the rest of the world that they are a well they are transparent, and they are one of the major platform companies. i think you will see them make significant acquisitions with the currency that they have. they have raised expectations, and they are going to have to start acting that way. i think you will see them focus on china over the next year or two, but they are strong global
ambitions. >> i think a lot of investors -- leslie, you told me this -- left wondering about global expansion. they did not give a timeline. en thatas the wh people are interested in. there is tremendous growth potential in china, but there is so much pressure put on this relationship with the chinese government. so far it has been able to succeed but what if the chinese government changes its mind? they need to be another markets to hedge that risk. >> what do you worry about, charles, when it comes to alibaba? after the ipo, what will you be watching? one, this is a gigantic growth company that is priced to grow, so there are targets that they need to hit over six months and everyone will be watching. but there are regulatory
concerns, too. in china, you have to dance that very good dance with the chinese government. that is full of uncertainty. there is the regulatory uncertainty on top of the economic risk. >> cory, how about you? deep vestry in violation that they are giving at $60 a share, if you look at how that compares to other companies, what you see that is growing faster than its growth rate. ebay.e that to amazon or those are the kinds of companies that we look at when we look at valuation in technology. for a company that is growing so fast, it is not the most extreme valuation. but it is still pretty expensive. >> pedestrian jew, but apparently 68 to them is a lucky
>> you are watching "bloomberg west," were we focus on technology and the future of business. there is then. major news for software companies today . larry ellison stepping down as head of oracle. a 20% premium over yesterday's closing price. concur makes software to help manage travel. a quick programming note, be sure to catch my interview with
alibaba executive chairman jack ma tomorrow morning live from the new york stock exchange. not a clock a.m. eastern right here on bloomberg television, i cannot wait to talk to him -- 9:00 a.m. eastern bloomberg television. have you wonder just how this relationship started? with the initial conversations were like between jack ma and yahoo! founder jerry? hans, i know you know jack ma, you have been intricately involved with many of these chinese companies as they have gone from two gigantic from infancy to gigantic juggernauts. became an investor in 2003, and then they played a role in connecting jack and
jerry. i am on a board that has facilitated activities between america and china. there was a ceo summit in 2005, and that is when jack and jerry met up with each other. they had a long conversation and a heart-to-heart talk. they decided that it made sense for the two to team up. back then, the evaluation for alibaba was $5 billion. jack took a lower offer in order to have control of the company. today we're looking at possibly a winter $62 billion -- $162 billion company. >> we do have a quote from jack ma, saying that jerry and i took a long walk, and our discussions quickly accelerated when i returned to china which resulted in a landmark transaction
between yahoo! and alibaba. what are the personalities? how did they work together initially in over the years? >> those to have a personality -- they have common ground. they complement each other. they are both very strategic, and jack has the cutting this to think ahead. jerry sees the value in what jack is doing. that, for anows market like china, you need to have a local star managing in coming up with services tailored to the local. a do nothing jerry gets enough credit for making that deal. -- i do not think it jerry gets enough credit for making that deal. yahoo! has been successful. thehen you look at the way business works, do you see the alibaba guys doing things differently than yahoo!? >> i think that yahoo! and
google and other companies in the u.s. are quite focused in the areas that they are in, but such a big are is land grab every company is in everything. for jackie will not be enough for e-commerce. also financial services and search. the ambition of the chinese internet giant has been more. their ambitions will not be limited only to china. i think over the next 10 years globalization will be a huge thing. >> what you expect jack to do and alibaba to do with the money that they make on the ipo? it has been suggested that they could by yahoo! on the balance sheet, they have a plethora of choices. what they have done over the last several months has been interesting. people would argue that it is not focused, but i would
disagree. i think they have a plan. that want to be much bigger and china, i know that is hard to imagine. right now they are an e-commerce company with a financial services upside, but in china any combination of the social networking or other businesses. and the rest of the world, only the systemina have that has the ability to expand beyond their own boundaries to tackle other opportunities outside of these markets. >> what about alibaba buying yahoo!? is not plausible? -- is that plausible? >> i think they will have a choice of things to do and will focus on emerging areas, whether in digital books and gaming or financial services or even search. i think they have a lot of choices ahead. >> you say they are a very
focused company, but a look at the information in the filing, and they are in so many businesses in someone it races and different kinds of businesses. it does not look like focus to me. [laughter] >> i think that is strategic. they can afford to make some mistakes. is that youe in vc focus less on your losses and focus on the positives you can get. the world that you see in china is just the beginning. i think the rest of the world in the next 10 years will present an even bigger opportunity. i think they can afford to make some mistakes. >> as i suggested the company that we see today is not be company that the shareholders will own 10 years from now? i think that, for the
american investor, it is more comforting to know exactly what they are going to do, but one thing that i have learned in the venture business is that no matter how smart the investors are, it is the management who makes things happen. they are the ones that can make magic. you buy stock, you are betting on the team. they will continue to innovate over the next 10 years. >> hans, one of the earliest investors in alibaba. investors around the world are waiting for alibaba's first day of trading. what could it mean for the global consumer base? will look at the impact of the record-breaking ipo, next -- we look at the impact of the record-breaking ipo, next. ♪
tell you about. the u.s. senate has passed legislation to fund the government through december 11. it also gives president obama the authority to equip and train syrian rebels. the bill goes to the president for his signature. it also extends the authority of the expert-import bank, another recent hot button issue. a $60 aalibaba, pricing share, raising 28 point $8 billion at the get-go, and setting a new u.s. record. but how did the chinese e-commerce giant get the business to this point, and w -- it go he go next next? you saw alibaba in its early days, and you must've seen so many changes as a group into
what it is today. describe that transformation. >> it has been an astounding story. we just heard in the previous statement that they had a valuation of a $5 billion, and look at them today. they have done a couple of things. one is that they have become mature -- they have consolidated their e-commerce position in china. remember, that is a huge and still growing position. they have gotten themselves into other businesses, they have shown themselves to be innovators in other areas. of numbers, 80% of china's online shopping goes through alibaba. paul, you are been more negative on alibaba. how are you feeling today. on the company, i do not think my views have changed.
about the price, i think it is a lower price than they could have gotten away with, so i think that as an ipo they will do well. for the company, that is a different story. the part of the story that we all miss is that we talk about them as if they were a technology company. i think the project is not about technology but about trying an entirely different is this model that has never entirely work. -- worked. that is the conglomerate. to generaloser electric than amazon's structure, and that structure has never worked in technology that electronic -- electronic. >> you brought up that point don't spend a lot of money on r&d, they have just been buying a lot of stuff. >> will they be the kind of company that creates a google smart car competitor? i do not know.
it is not something that is a part of their strategy. they set up an office in silicon valley to buy stakes in the starter companies and penetrate the market in that way. that has been their strategy historically. they are a company that keeps the r&d costs low, which gives a high margin. >> earlier, hans was saying that is a very focused company. when i read the prospectus, i do not see a focused company. the uc focus when you see alibaba -- do you see it focus when you see alibaba? >> i think it has a very deliberate strategy. in the early days of google, we had questions back when they ipo did as to whether they were doing too many things. that throwinge
things against the wall and seeing what sticks was a common commentary. after a. of time, we have seen the of these bets starting to pay off. at now, it seems more purposeful. i see them getting into financial services, i see them getting into mobile messaging in a big way. the previous comments are very fair, they do this through acquisition rather than r&d. but it is very easy to pull back into a coherent picture, and it is not that much different than what may be amazon or google has done. >> paul, it sounds like that is not what you are thinking. >> no, i don't see any of that. i don't think that applies to the google ipo. google ipo with the was at the company was too reliant on a single product, that it was a single legged
stool, no so much that they had so many pieces that people could not keep track. it was over reliance on a single product, a single strategy. alibaba, i think is legitimate criticism is that this looks like a conglomerate with many, many material contributing pieces of the to untangle,ficult but focused on the technology strategy. >> why should we believe in alibaba? where do you see this company going next? will they fulfill the potential that everyone -- everyone excited from paul -- aside from paul thinks that they have? show, i have always been quite bullish on alibaba. we know that e-commerce is growing in china at a record pace even as it is already a huge market. it has a huge to mustek market
which is going to fund of this activity -- domestic market which is going to fund this activity. messagingn we have and on-demand services. couldare all things that be woven together without too much imagination into services and more and more services delivered through mobile phones. mobile revenues are about a third of the last quarter's revenues. grow, weontinues to have many growth engines in alibaba that maybe you did not realize. leslie, you when i have a day on the floor of the new york stock exchange tomorrow morning. a new iphone hits stores tomorrow. apple ceo tim cook has a message for customers. find out what he says about apple's privacy practices and
>> will come back, i am emily chang, and this is "bloomberg west." remember to catch my interview with alibaba chairman jack ma live from the stock exchange, 9:00 a.m. eastern. apple has updated its privacy company after the introduction of security sensitive services like apple pay. on their website, tim cook says, quote, unlike our competitors, apple cannot bypass your password and cannot access the data. it is not be for us to respond to government warrants. a key issue for apple, after the leak of celebrity photos stored on their system.
i started by asking paul white tim cook is -- paul wyatt tim cook is posting this letter now. >> two reasons. one is because of the recent issues with privacy and the recent the cup photos. -- leak of photos. there has been a perception that they are lacking in icloud's security. the second, you mentioned that they taught that the new services that are a part of the iphone 6 launch require you to agree to some sharing of data, specifically the health data, or adding a new keyboard. add it up a lot to other servers, and people are reticent and nervous. >> earlier this week, tim cook talk to charlie rose. he used the word offhanded when
talking about how other companies use our data. >> we are not in that business. i am offended by lots of it. and so, you know, i think people have a right to privacy. and i think that is going to be a very key topic over the next year or so. we will reach higher and higher levels of urgency as more and more incidents happen. >> more from the letter today, we do not build a profile based on your web browsing content to sell to companies, we do not monetize the information on your phone, we do not read your e-mails or messages to get information to market to you. tim, what you make of the tone of these remarks that seem to take aim at other companies like google? >> there definitely trying to differentiate themselves, create
the idea that they are different big data.ta -- there is concern that data is going to be mind. --mined. just got back from the apple store, and not one person m entiuoned concerns with privacy. >> than of those people were probably jennifer lawrence of the people who got themselves hack. at the same time, they are offering apple pay and other, more intrusive things that get deeper into people's wallets. >> than you get to a customer like my mother. likes it, iphone, she but she is concerned about what kind of information will be in there and who will see it and access it. we saw the attorney general with a letter with the next one act explanation --
bloomberg contributing editor paul, bloomberg reporter tim. now with the bite, a number that tells us a whole lot. 270, that speaks to the confusing structure of alibaba. they have 270 subsidiaries and consolidated entries in china and other jurisdictions. shareholders in this company will have to figure out that when they buy a share in a cayman islands holding company, they are taking part in that complexity. is an offering like few i have ever seen. conglomerate indeed, i am excited to see how this plays out. i will be on the floor of the nyse with alibaba chairman and cofounder jack ma tomorrow. don't miss it. ♪
>> welcome to "money clip." i am adam johnson. here's the rundown. and nation, the topic of conversation, small business. in sports, money talks. more sponsors have a message for the nfl and its commissioners. around the world, whether it is yes or no, the scottish referendum, the one true winner? intech, tim cook. exclusive look at the making of the watch and remaking of the copy. jaguar, new technology coming up